Sprouts Farmers Market 2013 Annual Report Download - page 20

Table of Contents
benefits, and other casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in
the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance
carriers, and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements on
an ongoing basis to ensure we maintain adequate levels of coverage.
Seasonality
Our business is subject to modest seasonality. Our average weekly sales fluctuate throughout the year and are typically
highest in the first half of the fiscal year. Produce, which contributed approximately 26% of our net sales for the fiscal year ended
December 29, 2013, is generally more available in the first six months of our fiscal year due to the timing of peak growing seasons.
Trademarks and Other Intellectual Property
We believe that our intellectual property has substantial value and has contributed to the success of our business. In
particular, our trademarks, including our registered SPROUTS FARMERS MARKET
®
, SPROUTS
®
and HEALTHY LIVING FOR
LESS!
®
trademarks, are valuable assets that we believe reinforce our customers’ favorable perception of our stores. In addition to
our trademarks, we believe that our trade dress, which includes the human-scale design, arrangement, color scheme and other
physical characteristics of our stores and product displays, is a large part of the farmers market atmosphere we create in our stores
and enables customers to distinguish our stores and products from those of our competitors.
From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we
believe, have infringed or misappropriated our intellectual property rights. Third parties have also, from time to time, opposed our
trademarks and challenged our intellectual property rights. We respond to these actions on a case-by-case basis. The outcomes of
these actions have included both negotiated out-of-court settlements as well as litigation.
Information Technology Systems
We have made significant investments in information technology infrastructure, including purchasing, receiving, inventory,
point of sale, warehousing, distribution, accounting, reporting and financial systems. We also maintain modern supply chain
systems allowing for operating efficiencies and scalability to support our continued growth. All of our stores, including those
acquired in the Transactions, operate under one integrated information technology platform. We believe our current information
technology infrastructure will support our growth plans but plan on continuing our history of investment in this area.
Regulatory Compliance
Our stores are subject to various local, state and federal laws, regulations and administrative practices affecting our business.
We must comply with provisions regulating health and sanitation standards, food labeling, equal employment, minimum wages,
environmental protection, licensing for the sale of food and, in many stores, licensing for beer and wine or other alcoholic
beverages. Our operations, including the manufacturing, processing, formulating, packaging, labeling and advertising of products
are subject to regulation by various federal agencies, including the Food and Drug
15